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Tuesday, October 29, 2013

In its latest Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises, the IFC has ranked Singapore as the top economy in terms of ease of doing business. The other top ranked economies are Hong Kong SAR, China; New Zealand; the United States; Denmark; Malaysia; the Republic of Korea; Georgia; Norway; and the United Kingdom.

Ukraine was the global top improver in 2013. The other economies that have made the most progress in several areas of regulation last year were Rwanda, the Russian Federation, the Philippines, Kosovo, Djibouti, Côte d’Ivoire, Burundi, the former Yugoslav Republic of Macedonia, and Guatemala

In South Asia, Sri Lanka made the most progress and was ranked 85 out of 189 economies, followed by Maldives (95), Nepal (105), Pakistan (110), Bangladesh (130), India (134), Bhutan (141), and Afghanistan (164).

Rankings could go up or down depending on progress in business regulatory environment, progress by other countries (based on data revisions and methodology) and addition of new countries in the ranking (this year Libya, Myanmar, San Marino, and South Sudan were added).

The data for all sets of indicators in Doing Business 2014 are for June 2013 except for paying taxes data that refer to January–December 2012.

In terms of ease of doing business, Nepal ranked 105 out of 189 countries. In 2013, Nepal ranked 103 out of 185 countries. Between DB2014 and DB2013, Nepal initiated one reform in starting a business, which helped increase its ranking 6 positions in that specific indicator. Specifically, Nepal reduced the administrative processing time at the company registrar and established a data link between agencies involved in the incorporation process. However, Nepal’s ranking dropped in all other indicators (except protecting investors, on which there was no change in ranking). It appears more progress made by other economies dropped ranking of Nepal by 2 positions below last year’s ranking. Here is a blog post based on DB2013.

In South Asia region, Nepal has the best ranking (24) in registering property. It requires 3 procedures, 5 days and 4.9% of property value to register a property in Nepal. The regional average is 6 procedures, 99.4 days (250 days in Afghanistan), and 7.2% of property value.

In terms of documents to export, Nepal has the worst performance in the region, requiring 11 documents against the regional average of 8. Sri Lanka has the best performance with just 5 documents required for exporting a container.

In terms of number of procedures required to enforce contracts, Nepal has best performance in the region with 39 required procedures as against 43 for regional average.

In terms of time taken to resolve insolvency, Nepal has the worst performance in the region. While it takes 5 years to resolve insolvency in Nepal, the regional average is 3 year. Furthermore, recovery rate is also the lowest in Nepal (24.5 cents on the dollar) compared 29.1 for the region (50.6 for Maldives).

The report also provides a new measure called ‘distance from frontier’, which benchmarks economies to the frontier in regulatory practice. In other words, it measures the absolute distance to the best performance on each indicator. When compared across years, the distance to frontier measure shows how much the regulatory environment for local entrepreneurs in each economy has changed over time in absolute terms, while the ease of doing business ranking can show only relative change.

An economy’s distance to frontier is indicated on a scale from 0 to 100, where 0 represents the lowest performance and 100 the frontier. For example, a score of 60 in DB 2012 means an economy was 60 percentage points away from the frontier constructed from the best performances across all economies and across time. A higher score in DB 2013 indicates an improvement.

Compared to DB 2013, in DB 2014, in Nepal, there was improvement in starting a business, dealing with construction permits, getting electricity and registering property. Trading across borders worsened. There was no change in other indicators.

About

Formerly, economics officer at Asian Development Bank, Nepal Resident Mission. Worked as a researcher at SAWTEE, Kathmandu. Also, worked as a consultant for Ministry of Commerce & Supplies, Government of Nepal; FAO; UNDP, GIZ-CIM, and ADB among others. I was an op-ed columnist for Republica between December 2008 – June 2012. I also worked as a Junior Fellow for Trade, Equity & Development program at Carnegie Endowment for International Peace, Washington, D.C .